FASB Summary of April 2, 2003 Board Meeting Discussion

Derivatives Implementation Group

At its April 2, 2003 meeting, the Board did not object to the staff’s issuing guidance on Statement 133 Implementation Issue No. B36, “Modified Coinsurance Arrangements and Debt Instruments That Incorporate Credit Risk Exposures That Are Unrelated or Only Partially Related to the Creditworthiness of the Obligors under Those Instruments,” and posting it as cleared guidance on the FASB website, subject to the following modifications:

The Board directed the staff to include a provision that permits companies ceding insurance under modified coinsurance arrangements to transfer securities only from the held-to-maturity and available-for-sale categories into the trading security category without calling into question the intent of those companies to hold other debt securities to maturity in the future; however, those “taint-free” reclassifications are limited to the amount and type of securities related to the embedded derivatives that are being newly accounted for as derivatives in conjunction with the initial application of the guidance in Implementation Issue B36 to modco arrangements.

The Board indicated support for deferring the effective date of the guidance in Implementation Issue B36 to the first day of the first fiscal quarter beginning after September 15, 2003, and modifying the title to refer to modified coinsurance arrangements.

The staff indicated that it plans to post the revised guidance in Implementation Issue B36 on the FASB website by April 10, 2003.